Office refurbishments in London hit an all time high in the half year to the end of March, according to Deloitte’s Summer 2023 London Office Crane Survey.
The 37 new refurbishment schemes providing 3.2m sq ft of office space that commenced in the period is the highest number since Deloitte started tracking activity in 2005.
The volume of all new office starts – refurbishments and new builds – was up by almost 80%, with more than 10m sq ft of space projected to be delivered during 2023.
Deloitte said the increase in activity had been driven by a combination of EPC regulations and occupier demand for high quality office space, which allows companies to attract and retain talent.
Sophie Allan, director in real assets advisory at Deloitte, said: “Developers seem to be cautiously optimistic about the future of London’s development pipeline. Positive signs include a huge increase in the volume of new starts compared to the previous survey and the highest volume of refurbishment starts on record, as developers race to avoid obsolescence.
“New infrastructure and expanding transport links have attracted people to previously overlooked areas like Midtown and the eastern fringes of the City. This is undoubtedly a vote of confidence in London after the intense disruption of the pandemic, disturbance to supply chains and rising inflation experienced over the past year.”
Margaret Doyle, chief insights officer for financial services and real estate at Deloitte, added: “Following pandemic-induced home working mandates, many businesses are now encouraging office attendance more proactively and are considering how to attract employees back to the office. Tenants’ shift toward quality over quantity has led to desire for attractive, sustainable, well-kitted out space, close to transport hubs and amenities. We expect that the need to bring offices up to scratch – especially in terms of energy efficiency – will drive London’s development for the rest of the decade.”
Philip Parnell, real estate valuation lead at Deloitte, said: “At a time when many of the traditional drivers of development activity such as capital value growth are lacking, a combination of positive ESG-related opportunities and downside stranding risks associated with physical obsolescence and accelerated value erosion, means there is strong stimulus for renewal.”
